Some Optimism about Greek Talks

February 18, 2015

An anonymous officials claims Greece will request an extension of the bailout program, but the devil is in the details.  Germany suspects a semantic shift only and wants assurances that Greece is prepared to continue the mandated austerity.  The situation is murky, but markets have today been inclined to assume an optimistic outcome rather than one that leads to a Greek default of exit from the single currency.

The dollar has risen 0.4% against the loonie and Swiss franc, 0.3% relative to the euro and kiwi, and 0.2% vis-a-vis the Australian dollar.  The yuan and yen are unchanged.  Sterling gained 0.6% against the dollar on better-than-expected British labor statistics.  Bank of England minutes were also released.

Japan’s Nikkei closed up 212 points or 1.2%.  In other Pacific Rim markets, stocks rose 0.7% in China, 1.0% in Australia and Indonesia and 0.6% in Singapore and India.  In Europe, equities have climbed 1.7% in Greece, 1.6% in Italy, 1.0% in Spain, 0.9% in France, 0.5% in Germany but nothing in Britain.

In futures trading, the 10-year Treasury yield extended its upswing.  Sovereign debt yields are up 7 basis points in the U.K., 2 bps in Germany and a basis point in Japan.

West Texas Intermediate oil fell back 1.7% to $52.62 per barrel.  Comex gold edged down 0.2% to $1,206.10 per ounce.

The Bank of Japan announced results of the Board’s February meeting.  Quantitative stimulus settings remain the same.  The overall economic assessment continues to see moderate recovery, low near-term inflation, and eventual acceleration of inflation toward the 2% target.  More stimulus will be deployed if but only if needed.  That could happen if the recovery falters or oil prices keep dropping sharply.

British claims for unemployment fell by 38.6K in January on top of December’s revised 35.8K decline.  Analysts were forecasting just a 25K drop.  Total on-year wage growth accelerated unexpectedly to 2.1% in December from 1.8% the month before, mainly reflecting strengthening growth in bonus pay.

The Swiss National Bank President warned that intervention will be used anew if the franc stays overvalued.  The Swiss ZEW expectations index plunged to a reading in February of minus 73 after January’s weakening to -10.8.  Investors were rattled by the abrupt suspension of the SNB’s cap on the franc/euro rate.

Construction output in the euro area fell 0.8% in December and ended 2014 3.5% below the end-2013 level.  Output on average climbed 2.0% in 2014 as a whole.

Some CPI and PPI figures were reported.  Portuguese producer prices fell 4.0% in the 12 months to January.  Malaysian CPI inflation slowed to 1.0% last month from 2.7% in December.  South African CPI inflation fell to 4.4% from 5.3% in December despite a 0.1 percentage point uptick in core inflation. 

U.S. mortgage applications slumped 13.2% last week, as the 30-year rate rose another 9 basis points to 3.93%.  Still to come: U.S. producer prices, industrial production, housing starts, building permits and FOMC minutes.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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